Mr Ashish aged 26 years is employed with an educational institution as a teaching faculty based in Bengaluru. He has four dependents: homemaker wife, parents and sister. The ancestral home belonging to Ashish’s father provides an income that enables the family to live comfortably. However, the household expenses including rentals is Rs 20,000 per month while the monthly take home income is Rs 55,000. To supplement the household income Mr Ashish’s wife is planning to take up employment in a neighbourhood school.
Financial goals
Mr Ashish’s primary responsibility is to get his younger sister married soon whereafter he would like to buy a car. Getting their children well educated is yet another aspiration, but this is still some time away.
Where he is now
The overall savings currently is Rs 35,000 per month translating into an annual surplus of Rs 4.20 lakhs. The current net worth is Rs 2.35 lakhs which is entirely parked in a bank savings account so as to enable liquidity needs for his sister’s marriage. The quantum of savings in the bank is sufficient to meet any contingency requirement for the elderly parents medical need, if any. Medical insurance is provided for the entire family by Mr Ashish’s employer to the tune of Rs 2.5 lakhs.
Recommendations
With marriage of sister being the highest priority, the funds in savings can be left as it is. Further, Mr. Ashish could go about investing Rs 4.20.lakhs in the following manner:
* Park 50 per cent of the funds (Rs 2.10 lakhs per annum) in two monthly income plans systematically (about Rs 12,000 pm).
* In addition about 15-20 per cent (about Rs 80,000) could be parked in a gold exchange traded fund again through a systematic investment plan.
* Term insurance for Rs 10 lakhs (premium of Rs 3,000 per year) could be taken.
* The current contributions to PF per year is Rs 30,000 leaving a balance of Rs 70,000 to be tendered in an equity tax linked saving scheme or NPS or PPF or insurance policies.
* Public provident fund accounts in the name of wife could be opened and funded to an extent of Rs 25,000 pa.
* Any other income can be saved in an equity fund with a long term perspective.
With age being on Mr Ashish’s side, the affairs are manageable but the extent of risk to be undertaken presently is kept to a minimum as the younger sisters wedding acquires importance over all the other events.
(L. Ravindran, PhD, is a financial advisor and managing director of Wealthmax Enterprises Management Private Ltd.)